Sierra Wireless Reports Fourth Quarter and Full Year 2018 Results

VANCOUVER, British Columbia–(BUSINESS WIRE)–Sierra Wireless, Inc. (NASDAQ: SWIR) (TSX: SW) today reported results
for its fourth quarter and fiscal year ended December 31, 2018. All
results are reported in U.S. dollars and are prepared in accordance with
United States generally accepted accounting principles (GAAP), except as
otherwise indicated below.

“We are accelerating the transformation of the company into a global IoT
solutions and services provider. We are centralizing our R&D, combining
our global sales team and driving efficiency programs throughout our
operations,” said Kent Thexton, President and CEO of Sierra Wireless.
“As we deliver cost savings, we are investing today in innovative
cellular technologies to enhance our Device To Cloud offering and drive
recurring subscription-based revenue. To accomplish this, we are
developing innovative technologies such as edge network software,
soft-SIM capabilities, LPWA and 5G embedded modules, as well as advanced
security for data management. We plan to leverage our strong device
position into the mass deployment of LPWA Cat M1/NB1 this year and the
roll-out of high-speed 5G technology over the next couple of years. We
have much to accomplish in 2019 and I believe the company is making the
right investments as we enter the next phase of global growth in the
Internet of Things.”

(1) See “Non-GAAP Financial Measures” and “Reconciliation of GAAP
and Non-GAAP Results by Quarter” below.

Fourth Quarter 2018

Revenue for the fourth quarter of 2018 was $201.4 million, an increase
of 9.7% compared to $183.5 million in the fourth quarter of 2017.
Product revenue was $178.2 million, up 5.3% year-over-year, and Services
and other revenue was $23.2 million, up 63.0% compared to the fourth
quarter of 2017. Quarterly revenue for the three business segments was
as follows: (i) Revenue from OEM Solutions was $148.7 million in the
fourth quarter of 2018, up 6.4% compared to $139.8 million in the fourth
quarter of 2017; (ii) Revenue from Enterprise Solutions was $30.3
million in the fourth quarter of 2018, down 5.1% compared to $31.9
million in the fourth quarter of 2017; and (iii) Revenue from IoT
Services was $22.4 million in the fourth quarter of 2018, up 89.1%,
compared to $11.9 million in the fourth quarter of 2017, driven by the
contribution from Numerex and organic subscriber growth.

GAAP RESULTS

Gross margin was $65.9 million, or 32.7% of revenue, in the fourth
quarter of 2018 compared to $61.8 million, or 33.7% of revenue, in the
fourth quarter of 2017.

Operating expenses were $70.1 million and loss from operations was
$4.2 million in the fourth quarter of 2018 compared to operating
expenses of $64.8 million and loss from operations of $2.9 million in
the fourth quarter of 2017.

Net loss was $3.8 million, or $0.11 per diluted share, in the fourth
quarter of 2018 compared to net loss of $3.5 million, or $0.11 per
diluted share, in the fourth quarter of 2017.

NON-GAAP RESULTS(1)

Gross margin was 32.7% in the fourth quarter of 2018 compared to 33.8%
in the fourth quarter of 2017.

Operating expenses were $55.7 million and earnings from operations
were $10.2 million in the fourth quarter of 2018 compared to operating
expenses of $52.5 million and earnings from operations of $9.5 million
in the fourth quarter of 2017.

Net earnings were $9.0 million, or $0.25 per diluted share, in the
fourth quarter of 2018 compared to net earnings of $9.2 million, or
$0.28 per diluted share, in the fourth quarter of 2017.

Adjusted EBITDA was $15.3 million in the fourth quarter of 2018
compared to $13.9 million in the fourth quarter of 2017.

Cash and cash equivalents at the end of the fourth quarter of 2018 were
$89.1 million, representing an increase of $21.6 million compared to
$67.5 million at the end of the third quarter of 2018. The increase in
cash was mainly due to lower working capital requirements, proceeds from
sale of our iTank business and the absence of Numerex
acquisition-related costs.

FULL YEAR 2018

Revenue for 2018 was $793.6 million, an increase of 14.9%, compared to
$690.7 million in 2017. Product revenue was $699.3 million, up 8.4%
year-over-year, and Services and other revenue was $94.3 million, up
108.0% compared to 2017. Annual revenue for the three business segments
was as follows: (i) Revenue from OEM Solutions was $583.2 million in
2018, up 5.2% compared to $554.5 million in 2017; (ii) Revenue from
Enterprise Solutions was $119.9 million in 2018, up 18.1% compared to
$101.5 million in 2017; and (iii) Revenue from IoT Services was $90.5
million in 2018, up 161.0%, compared to $34.7 million in 2017, driven by
the contribution from Numerex and organic subscriber growth.

GAAP RESULTS

Gross margin was $264.6 million, or 33.3% of revenue, in 2018 compared
to $234.2 million, or 33.9% of revenue, in 2017.

Operating expenses were $282.8 million and loss from operations was
$18.3 million in 2018 compared to operating expenses of $234.1 million
and earnings from operations of $0.1 million in 2017.

Net loss was $24.6 million, or $0.68 per diluted share, in 2018
compared to net earnings of $4.5 million, or $0.14 per diluted share,
in 2017.

NON-GAAP RESULTS(1)

Gross margin was 33.4% in 2018 compared to 34.0% in 2017.

Operating expenses were $229.7 million and earnings from operations
were $35.3 million in 2018 compared to operating expenses of $195.1
million and earnings from operations of $39.6 million in 2017.

Net earnings were $32.4 million, or $0.90 per diluted share, in 2018
compared to net earnings of $34.5million, or $1.05 per diluted share,
in 2017.

Adjusted EBITDA was $55.9 million in 2018 compared to $54.7 million in
2017.

(1) See “Non-GAAP Financial Measures” and “Reconciliation of GAAP
and Non-GAAP Results by Quarter” below.

Accounting Standard Adoption

We adopted the new accounting standard for revenue recognition (ASC 606)
effective January 1, 2018. Our fourth quarter and full year 2018
financial results reflect the adoption of this new standard and prior
periods have been adjusted accordingly.

Financial Guidance – Full Year & Q1 2019

Given the current macro-economic environment and some weakness that we
are experiencing in the automotive, enterprise networking and mobile
computing markets, we provide the following quarterly and full year
guidance for 2019 (see below). The company is undertaking a cost
reduction program over the next 18 to 24 months while also investing in
new solutions and technologies including LPWA, 5G, embedded SIM,
security, and edge networking software.

For the year ended December 31, 2019, we expect revenue to be flat
year-over-year and Adjusted EBITDA is expected to be approximately $35.0
million. Non-GAAP net earnings per share is expected to be approximately
$0.30 for Full Year 2019.

For the first quarter of 2019, we expect revenue to be in the range of
$170.0 million to $174.0 million and Adjusted EBITDA to be in the range
of $2.0 million to $4.0 million. Non-GAAP net loss per share is expected
to be approximately $0.02 to $0.06 in the First Quarter of 2019.

This non-GAAP guidance constitutes “forward-looking statements” within
the meaning of applicable securities laws and reflects current business
indicators and expectations. These statements are based on management’s
current beliefs and assumptions, which could prove to be significantly
incorrect. Forward-looking statements, particularly those that relate to
longer periods of time, are subject to substantial known and unknown
risks and uncertainties that could cause actual events or results to
differ significantly from those expressed or implied by our
forward-looking statements, including those described in our regulatory
filings. See “Cautionary Note Regarding Forward-Looking Statements”
below.

Analysts’ Days – Toronto & London

The senior management of the company will be hosting Analysts’ Days in
both Toronto and London in the weeks following our First Quarter 2019
earnings release and conference call on May 9th, 2019.

Non-GAAP Financial Measures

We disclose these non-GAAP financial measures as we believe they provide
useful information to investors and analysts to assist them in their
evaluation of our operating results and to assist in comparisons from
one period to another. Readers are cautioned that non-GAAP financial
measures do not have any standardized meaning prescribed by U.S. GAAP
and therefore may not be comparable to similar measures presented by
other companies.

Non-GAAP gross margin excludes the impact of stock-based compensation
expense and related social taxes and certain other nonrecurring costs or
recoveries.

Non-GAAP earnings (loss) from operations includes allocation of realized
gains or losses on forward contracts and excludes the impact of
stock-based compensation expense and related social taxes,
acquisition-related amortization, acquisition-related and integration
costs, restructuring costs, impairment and certain other non-recurring
costs or recoveries.

We use the above-noted non-GAAP financial measures for planning purposes
and to allow us to assess the performance of our business before
including the impacts of the items noted above as they affect the
comparability of our financial results. These non-GAAP measures are
reviewed regularly by management and the Board of Directors as part of
the ongoing internal assessment of our operating performance. We also
use non-GAAP earnings from operations as one component in determining
short-term incentive compensation for management employees.

Adjusted EBITDA is defined as net earnings (loss) plus stock-based
compensation expense and related social taxes, acquisition-related and
integration costs, restructuring cost, impairment, certain other
nonrecurring costs or recoveries, amortization, foreign exchange gains
or losses on translation of certain balance sheet accounts, unrealized
foreign exchange gains or losses on forward contracts, interest and
income tax expense. Adjusted EBITDA is a metric used by investors and
analysts for valuation purposes and is an important indicator of our
operating performance and our ability to generate liquidity through
operating cash flow that will fund future working capital needs and fund
future capital expenditures.

Conference call and webcast details

Sierra Wireless President and CEO, Kent Thexton, and CFO, David
McLennan, will host a conference call and webcast with analysts and
investors to review the results on Wednesday, February 13, 2019, at 5:30
PM Eastern Time (2:30 PM PT). A live slide presentation will be
available for viewing during the call from the link provided below.

To participate in this conference call, please dial the following number
approximately ten minutes prior to the start of the call:

The webcast will remain available at the above link for one year
following the call.

Cautionary Note Regarding Forward-Looking Statements

Certain statements and information in this press release are not based
on historical facts and constitute forward-looking statements or
forward-looking information within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995 and Canadian securities laws
(“forward-looking statements”) and may include statements and
information relating to our Q4’18 corporate update; financial guidance
for the first quarter of 2019 and our fiscal year 2019, our business
outlook for the short and longer term, statements regarding our
strategy, plans, goals, objectives, expectations and future operating
performance; the Company’s liquidity and capital resources; the
Company’s financial and operating objectives and strategies to achieve
them; general economic conditions; estimates of our expenses, future
revenues, non-GAAP earnings per share and capital requirements; our
expectations regarding the legal proceedings we are involved in;
statements with respect to the Company’s estimated working capital;
expectations with respect to the adoption of IoT solutions; expectations
regarding trends in the IoT market and wireless module market;
expectations regarding product and price competition from other wireless
device manufacturers and solution providers; and our ability to
implement effective control procedures. Forward-looking statements are
provided to help you understand our views of our short and long term
plans, expectations and prospects. We caution you that forward-looking
statements may not be appropriate for other purposes. We do not intend
to update or revise our forward-looking statements unless we are
required to do so by securities laws.

expected deployment of next generation networks by wireless network
operators;

our operations not being adversely disrupted by other developments,
operating, cyber security, litigation, or regulatory risks; and

expected tax and foreign exchange rates.

Are based on our management’s current expectations and we caution
investors that forward-looking statements, particularly those that
relate to longer periods of time, are subject to substantial known and
unknown material risks and uncertainties. Many factors could cause our
actual results, achievements and developments in our business to
differ significantly from those expressed or implied by our
forward-looking statements, including without limitation, the
following factors. These risk factors and others are discussed in our
Annual Information Form and Management’s Discussion and Analysis of
Financial Condition and Results of Operations, which may be found on
SEDAR at www.sedar.com
and on EDGAR at www.sec.gov
and in our other regulatory filings with the Securities and Exchange
Commission in the United States and the provincial securities
commissions in Canada:

competition from new or established competitors or from those with
greater resources;

disruption of, and demands on, our ongoing business and diversion
of management’s time and attention in connection with acquisitions or
divestitures;

the loss of, or significant demand fluctuations from, any of our
significant customers;

our ability to attract or retain key personnel and the impact of
organizational change on our business;

deterioration in macro-economic conditions and resulting reduced
demand for our products and services;

risks related to the acquisition and ongoing integration of Numerex;

cyber-attacks or other breaches of our information technology
security;

risks related to the transmission, use and disclosure of user data
and personal information;

risks inherent in foreign jurisdictions; and

risks related to tariffs or other trade restrictions.

About Sierra Wireless

Sierra Wireless (NASDAQ: SWIR) (TSX: SW) is an IoT pioneer, empowering
businesses and industries to transform and thrive in the connected
economy. Customers start with Sierra because we offer a device to cloud
solution, comprised of embedded and networking solutions seamlessly
integrated with our secure cloud and connectivity services. OEMs and
enterprises worldwide rely on our expertise in delivering fully
integrated solutions to reduce complexity, turn data into intelligence
and get their connected products and services to market faster. Sierra
Wireless has more than 1,300 employees globally and operates R&D centers
in North America, Europe and Asia. For more information, visit www.sierrawireless.com.

AirPrime, AirLink, AirVantage, mangOH and Legato are trademarks of
Sierra Wireless. Other product or service names mentioned herein may be
the trademarks of their respective owners.